Donovan Construction Co. v. General Electric Co.

• Decision Date: 05 August 1955
• Docket Number: Civ. No. 2338.
• Citation: 133 F. Supp. 870
• Parties: DONOVAN CONSTRUCTION CO., a corporation; James Construction Co., a corporation; and Wismer & Becker, a partnership consisting of Edwin W. Wismer and Hugo E. Becker, individually and as joint venturers doing business as Donovan-James-Wismer & Becker, Plaintiffs, v. GENERAL ELECTRIC COMPANY, a Corporation, Defendant.
• Court: U.S. District Court — District of Minnesota

133 F. Supp. 870

DONOVAN CONSTRUCTION CO., a corporation; James Construction Co., a corporation; and Wismer & Becker, a partnership consisting of Edwin W. Wismer and Hugo E. Becker, individually and as joint venturers doing business as Donovan-James-Wismer & Becker, Plaintiffs, v. GENERAL ELECTRIC COMPANY, a Corporation, Defendant.

Civ. No. 2338.

United States District Court D. Minnesota, Third Division.

August 5, 1955.

Kenneth M. Owen and Peter Dorsey (of Dorsey, Colman, Barker, Scott & Barber), Minneapolis, Minn., appeared in behalf of defendant in support of said motion.

Mandt Torrison and Jerome B. Simon, St. Paul, Minn. (Bundlie, Kelly & Maun, St. Paul, Minn., of counsel), appeared in behalf of plaintiffs in opposition thereto.

NORDBYE, Chief Judge.

Defendant entered into a contract in April, 1946, with the United States Bureau of Reclamation to manufacture certain electrical generators to be used in connection with the construction of the Davis Dam on the Colorado River. The various units included in the contract were shipped to Kingman, Arizona, between October, 1948, and February, 1949. In September, 1949, the Bureau contracted with plaintiffs as joint venturers to install the electrical generators supplied by defendant. Plaintiffs contended in their original complaint that certain thrust bearings in the units supplied by defendant were defective and that it was necessary for them to disassemble and reinstall the generator equipment several times before the equipment could be made to operate. Some parts had to be shipped back to defendant's plant for the performance of certain repair work. Plaintiffs contended that, by reason thereof, they were delayed in the performance of their contract with the Government, that their costs in making the installations were increased substantially, and that therefore they lost certain anticipated profits in the performance of their contract. The original complaint alleged negligence only in the manufacture of the thrust bearings, and plaintiffs contended that their damage and injury "was caused solely by the negligence of defendant in manufacturing and supplying for installation the aforesaid negligently constructed and defective turbine and generator equipment." There are no allegations in the original complaint as to any negligence on the part of the engineers furnished by defendant to supervise the installation and operation of the units.

After the parties hereto were at issue, plaintiffs moved to amend their complaint by adding Paragraphs VI to IX, inclusive, thereto. The proposed amendment, which the Court allowed, set forth certain covenants, warranties and guaranties which defendant made to the Government in the April, 1946, contract in connection with the manufacture and construction of the turbine and generator equipment and that defendant would furnish engineering advice and personnel for the purpose of the final installation and testing of the equipment. Plaintiffs allege in these paragraphs that defendant's warranties and covenants with respect to such turbine and generator equipment were made partly for their benefit as installing contractors. The amending paragraphs allege that, because of the delay occasioned by defendant's breach of certain warranties, guaranties and covenants with reference to the equipment furnished by defendant and the failure of defendant's supervising engineers to make timely discovery thereof, plaintiffs were delayed in the performance of their contract with the Government and were unable to complete the performance of their contract until June 26, 1951, to their damage in the sum of $146,517.82. This is the same, identical amount of damages claimed in the previous cause of action based upon defendant's negligence. Therefore, there are in effect two causes of action alleged — one based upon tort and the other upon contract. The parties hereto have so construed the amended complaint, and obviously that was the intent of the pleader in proposing the amending paragraphs VI to IX, inclusive.

The position taken by defendant on this motion with respect to the alleged negligence is that a manufacturer of a product has no duty to use due care with respect to manufacturing and supplying its product to anyone other than its contract vendee. It concedes that, for the purpose of this motion, it was negligent in the manufacture of these thrust bearings, but it contends that the ordinary rules regarding liability for negligent conduct are not applicable herein, and it seeks to invoke what it terms to be the general rule that the liability of a manufacturer for its negligence is restricted by the contractual requirements of privity. It contends that plaintiffs cannot recover unless they bring their cause of action within one of the recognized exceptions to the general rule of nonliability and that these exceptions have not, and cannot, be extended to permit recovery for mere economic loss as distinguished from injury to life and limb or physical injury to property.

The defendant emphasizes the decision of the Court of Appeals of this Circuit in Huset v. J. I. Case Threshing Machine Co., 8 Cir., 1903, 120 F. 865. No purpose will be served in attempting to discuss the exceptions noted to the general rule announced by Judge Walter Sanborn in the Huset case, nor to discuss Judge Cardozo's landmark decision in MacPherson v. Buick Motor Co., 1916, 217 N.Y. 382, 111 N.E. 1050, L.R.A. 1916F, 696, wherein that court departed from, or at least extended and modernized the limited doctrine of a manufacturer's liability as noted in the Huset case. Neither is it necessary to discuss the subtle and fine distinctions sometimes noted by courts in determining whether the article manufactured is inherently dangerous or imminently dangerous. Obviously, the failure of the thrust bearings in the generator equipment to operate properly by reason of negligent construction could not possibly be considered as an instrument dangerous to life, limb or property, and plaintiffs make no such contention. It is not contended that the alleged negligence caused any physical harm to the person or property of the plaintiffs. Undoubtedly there is confusion in the many decisions which have discussed this subject. The Huset case may now be entirely outmoded and MacPherson v. Buick Motor Co., supra, and the multitude of cases which have followed it may well have pronounced broader and more realistic principles of liability for negligent manufacturers, Carter v. Yardley & Co., Ltd., 1946, 319 Mass. 92, 64 N.E.2d 693, 164 A.L.R. 559; Todd Shipyards Corp. v. United States, D.C.D.Me.1947, 69 F.Supp. 609; Todd Shipyards Corp. v. Harborside Trading & Supply Co., D.C.E.D.N.Y., 1950, 93 F.Supp. 601; E. I. Dupont de Nemours & Co. v. Baridon, 8 Cir., 1934, 73 F.2d 26; Mannsz v. Macwhyte Co., 3 Cir., 1946, 155 F.2d 445; Ellis v. Lindmark, 1929, 177 Minn. 390, 225 N.W. 395; but see A. J. P. Contracting Corporation v. Brooklyn Builders Supply Co., 1939, 171 Misc. 157, 11 N.Y.S.2d 662, and Sperling v. Miller, Sup.App.T., 1944, 47 N.Y.S.2d 191; Blich v. Barnett, 1951, 103 Cal.App. 2d Supp. 921, 229 P.2d 492; National Iron & Steel Co. v. Hunt, 1924, 312 Ill. 245, 43 N.E. 833, 34 A.L.R. 63; Buckley v. Gray, 1895, 110 Cal. 339, 42 P. 900, 31 L.R.A. 862; Ultramares Corp. v. Touche, 1931, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139, but plaintiffs have not found any well-considered decisions that permit recovery against a manufacturer by a third party on the basis of a manufacturer's negligence in absence of a showing that the article in question was negligently manufactured and that it was reasonably foreseeable by the manufacturer that the article, if used, would cause physical injury to persons or property of others. And the recognition of that principle of liability of manufacturers lays aside any question of privity and any distinction as to articles manufactured which are inherently dangerous, imminently dangerous, or whether the article merely possesses harmful potentialities to persons or property when constructed or manufactured carelessly. However, plaintiffs' inability to find any support for their claim based upon mere negligent is due to the fact that the law does not spread its protection to those who have sustained a loss such as allegedly occurred to plaintiffs in absence of an intentional wrong. Plaintiffs assert no property interest in the allegedly defective bearings. Nor do they contend that any of their own property has been physically injured by defendant's conduct, and there is no assertion that defendant intentionally caused any damage to plaintiffs. They merely contend (Paragraph IV):

"That the turbine and generator equipment, to be installed by plaintiffs under the said contract, was supplied to the United States of America by the defendant; that it was known to the defendant that the installation of said equipment required the expenditure of time, labor and materials and the use of construction equipment; that it was further known to the defendant that plaintiffs had contracted with the United States of America to make the installation of said turbine and generator equipment, and defendant knew or should have known that, by supplying defective and negligently constructed turbine and generator equipment, defendant would delay plaintiffs' completion of the installation of such equipment and cause damage to plaintiffs by increasing the costs of performance of plaintiffs' said contract with the United States of America."

And further, that defendant negligently supplied turbine and generator equipment manufactured in a negligent and faulty manner and constructed with defective and imperfect materials and that, by reason thereof, the equipment broke down on several occasions after it was installed by plaintiffs. The complaint then further alleges that, because of the breakdown, delays occurred whereby plaintiffs were unable to finish their entire work by April 7, 1951,...